While the British hunt for inexpensive apartments, foreigners buy luxury properties in London, disregarding the crisis. London is a refuge and the last point of the trip for many wealthy people from around the world. Why is it happening and how long will it last? And what should ordinary people do? We asked Roman Grigoriev, the founder of LonGrad, Member of the Royal Institution of Chartered Surveyor (RICS).
The cheapest and the most prestigious property in London
"Supply and demand in the luxury segment have almost leveled, and in economy class there is an absolute shortage". On the photo: elite houses in Mayfair
– Let's model two situations of buying residential property. The first is when I need to buy the cheapest apartment in London. The second is when I have a lot of money and want to settle in a prestigious area.
– Cheap property in London is neither in the center, nor even in the outskirts, but in the suburbs. It is so-called commuter belt, which has excellent transport links with London, so that people can go to work and back every day. There are very few studios and they can usually be found only in Central London.
One bedroom apartment in a suburb of London, thus, is considered as the most affordable option. In a decent district in a normal house where you will have good neighbours, and from where you can reach Central London by public transport, this property will cost at least €200,000-250,000.
Now the second situation, when you have a lot of money and good taste. Many people are mistakenly thinking that the rich choose only the Boroughs of Kensington and Chelsea. In fact, things are not quite so. I would single out three prestigious locations that are a little closer to the center, namely, to the south and east of Hyde Park. Belgravia is a quiet area which looks like a bedroom suburb in the good sense. Mayfair is a fashionable district with lots of Michelin starred restaurants, 5 star hotels and private clubs. Knightsbridge is always full of life, entertainments and tourists.
The mayor couldn't solve the housing problem
"Johnson is the only politician who honestly says that the city needs financial infusion, including Russian oligarchs. But one thing is to speak, and the other is to do"
– Is there a lot of housing under construction in London?
– In general, a lot, and the situation is significantly better than in 2008, when there was almost no construction, or than in 2010, when there were only a few projects. Now developers are more active, but we must realize that the lion's share of housing under construction is elite real estate that costs from €15,000-20,000 per sq.m and above.
Supply and demand in the luxury segment have almost leveled, and in economy class there is an absolute shortage. Apartments in all these houses, which are rented out in London, sell instantly. Let me tell you about a situation that I observed personally. Near my place they were selling apartments in a new house, and one morning I saw such picture out of the window: there was a queue of 40 people and it was clear that some of them spent the night in tents to be the first. Many probably would like to buy several apartments, but the developer did not give more than one to "the same hands."
– How does the mayor plan to solve the lack of housing?
– Mayor Boris Johnson does everything for London to remain a place of international luxury real estate, rather than retreat from foreign money. (Some have suggested that when buying housing priority was given to Londoners, not foreigners. – ee24.com). Johnson is the only politician who honestly says that the city needs financial infusion, including Russian oligarchs.
But one thing is to speak, and the other is to do. Here Boris Johnson has modest capabilities. He can only speak mouthpiece to voice plans. The management structure of the city is made so that important issues are the responsibility of 33 municipalities (City and 32 boroughs), and the mayor's office plays a coordinating role. For example, Boris is responsible for transport, sport and culture. Formally, the executive branch is also responsible for spatial planning, but it is in the form of strategy: Boris can not specify exactly where and what exactly to build.
– And in fact, it was him who had the idea of a new airport: demolish Heathrow, located in the city, and build houses. New housing in the area would be enough for 300,000 people.
– Heathrow is not going anywhere. The airport is already "jammed to the rafters" and unable to cope with passenger flow. Construction of a new runway is a natural development, and construction of a new airport is the alternative one. Given that real estate in west London, where Heathrow is located, is expensive, it would be logical to think about creating an air harbor to the east of the capital, as Johnson did. He came up with the idea, but then nothing depends on him, the solution lies within the competence of the authorities of the United Kingdom.
The Russians didn't notice the crisis
"If in the 1990s newly-minted oligarchs dominated, now the following niche entered the market: assistant directors and managers. Russia continues to "issue" millionaires and billionaires"
– It is believed that the flow of the Russians to London has already dried up: everyone bought what they wanted, and now the main customers in the luxury segment are residents of countries where the wealthy class is still emerging. The Ukrainians or the Africans, for example.
– Compared to the pre-crisis period the percentage of the Russians among our customers, on the contrary, increased, and approximately twice. Of course, it is not an indicator, but about the market as a whole, I can say three things. Firstly, the change in the composition of buyers. If in the 1990s newly-minted oligarchs dominated, now the following niche entered the market: assistant directors and managers. Secondly, Russia continues to "issue" millionaires and billionaires, this stage has not yet passed. Thirdly, many of those who bought an apartment or a house in London, accustomed in England and got convinced of transparency of law, expand their presence at the expense of non-residential real estate. In particular, the Russians begin to participate in development projects and acquire commercial properties. Profitability of such investments can vary from 3% to 8% per annum.
– How has the current ruble crisis affected elite real estate market in London?
– In contrast to the lower segment, there is different dynamics. Our Russian clients store money in assets and such currencies as dollar, euro, pound, so the fluctuations of exchange rates did not affect the level of demand and purchasing power.
– The economy is clear, and what about the politics? It is your client who should worry about the fate of his savings in current Russian reality, when anything can be banned any day or new sanctions can be introduced...
– This concern is really discussed more and more often, and probably due to it the number of our buyers increased. In fact many move permanently, dissatisfied with uncertainty in the banking sector and Russian economy as a whole.
When it will be bad in London?
"London's quiet harbor retains all fortunes. But up to a point: if is it bad in the whole world, it will be bad for everyone"
– Prices on property in London predict stable growth, but no one can predict its tempo. Do you think foreigners will continue to follow the call of Boris Johnson and buy housing?
– Demand for property in London will not reduce, but at the same time supply will not grow. Unfavorable market conditions, i.e. imbalance of supply and demand will be observed in any case, unless there is the next global crisis or a full-scale war. Though ... the worse is the world, the better is situation in London. Quiet harbor retains all fortunes. But up to a point: if is it bad in the whole world, it will be bad for everyone.
Interview: Alexander Fetyukov, ee24.com
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